April Newsletter: Bidding on Your Competitors’ Trademarks? Think Again!
By David M. Cox, counsel to Prominent Placement
It’s every marketer’s dream to grow market share by stealing customers from their competitors. Many companies have attempted to divert prospects away from other providers by bidding on competitors’ name in the search engines. Imagine searching for “McDonald’s” and seeing a pay-per-click ad for Burger King, for example. This is a very common practice, and is currently allowed by Google, Yahoo and Bing.
That said, a recent federal lower court case arising in California calls this practice into question. The Disability Group, a law firm specializing in social security disability claims, paid substantial damages for using the name of its competitor, Binder and Binder, as a keyword in its PPC searches with Google AdWords. This lower court opinion poses substantial risk for companies as well as their officers (personally) who use a competitor’s trademarked name as a PPC keyword.
The case is Harry J. Binder, et al. v. Disability Group Inc., et al. The Disability Group was sued by its competitor for using its competitor’s name, “Binder and Binder,” as a keyword that triggered the appearance of the Defendant’s websites as a “sponsored link.” A corporate officer of the Defendant was held personally liable for violation of federal laws prohibiting trademark infringement and false advertising. The Court also found a violation of a California prohibition on unfair competition.
On the Trademark Infringement claim, the court ruled that the use of the trademark as a keyword in PPC advertising caused “a strong likelihood of confusion” among consumers. Similarly, on the False Advertising claim, the Court found that the use by Defendant of the Binder and Binder name was likely to confuse potential clients into thinking they were being led to the Binder and Binder website.
The Court awarded damages against the Disability Group for lost profits, although it declined to award damages for corrective advertising, since the use of the keyword did not appear to create any negative opinions of Binder and Binder. The Court held Defendant’s corporate officer personally liable for willful misconduct for knowingly and willfully using the Binder and Binder name as a keyword. It considered awarding “treble damages” (three times lost profits), but instead awarded double damages under the false advertising statute. Lastly, the Court concluded that this case was so “exceptional” (i.e., malicious, fraudulent, deliberate, or willful) as to justify an award of attorneys’ fees.
It is too early to tell whether other courts will follow the example set forth in this case. The Court used very strong language in its decision, and relied upon a general perception that consumers of search engines tend to be unsophisticated and easily confused (at least for the time period it takes to click on a link). Companies seeking to bid on competitors’ trademarks should proceed cautiously and be aware of all potential liabilities if they continue this practice.
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hmmm….
I wish there was more information regarding whether or not the keyword was used in the ad copy or if it was simply “bid on” by the competitor.
Certainly “bidding” on a competitor name, but not using that competitor’s name in copy nor headline, should be considered an acceptable practice. This potentially gives the advertiser a chance to at least promote is own, perhaps comparable services, to an audience that may only know one particular brand.
Burger King would have every right to appear for a McDonald’s search as long as all the ad copy and headline information was Burger King specific and not include McDonald TM terms.
The interesting thing for me, though, is how quality plays into this. If you simply bid on a TM keyword, but don’t use that keyword in the ad nor the landing page, seemingly the quality score would be so low, the ad wouldn’t get much play anyway – even if it was the only ad bidding in the space.
This has been my experience anyway. Google’s quality score, as vague as it is, has seemed to auto-correct situations like this by blunting the exposure of ads with low quality scores.
You might squeeze in by using phrase or exact match on longer-tail phrases, but even so, my analytics have always shown rather poor performance when trying to buy competitor names.
Curious what others in “the biz” think…
I was directly involved in two incidents re this subject over 10 years ago. A smaller competitor was buying Google PPC ads using our federally registered trademark as a defined PPC search term. They did not use our registered mark in the ad.
We thought that was a great idea, so we turned around and did it to one of our bigger competitors. Shortly thereafter, we received a cease and desist notice from the company’s attorney. Their take was we were infringing on their federally registered trademark even though we did not use their mark in the ad.
While we were a small company, we used a large firm (Kilpatrick Stockton at the time). Our attorney recommended we stop the campaign immediately. I don’t recall if the legal team had a position on the legality of the use, but they made it clear we were going to have to spend a lot of money defending ourselves if we didn’t stop. Naturally, we stopped.
We in turn sent a cease and desist memo to the smaller company. (It flows downhill!). They didn’t stop until our attorney sent a registered letter to their attorney. Then it stopped immediately.
We discussed the issue with Google at the time. They had not been contacted by the attorney/company and therefore they had no opinion/issue with it. They were not going to act as the police force.
As a 20 year software vet, I am constantly involved in intellectual property issues/discussions/legalities. As the good attorneys will tell you, tread very lightly around IP. Companies that invest in the federal registration process to protect marks (names and symbols) are typically going to work hard and spend hard to enforce the registration. We all know that is true for the multi-nationals, but it is true for even small companies.
I’m not a lawyer so I don’t give legal advice! As a business owner, I feel comfortable suggesting that you use caution and seek legal advise prior to using a trademark (registered or not) in a paid search campaign.
Another implication is a potential bidding war on each other’s brand terms. You (being the King) start bidding on McDonald’s terms, McDonald’s sees this and then bids on your terms, creating a bidding war with the only winner being the search engine due to the inflated CPCs.
Also, as a precaution of how serious the bidding on competition is getting there is now software that allows company’s to police who is bidding on their terms or just showing up on them due to match type in real time. This gives companies the control to monitor, manage resellers or parter companies, etc. But, if people weren’t concerned about this no one would have developed the software!
Wow, did I learn THAT one the hard way!
Had several of my online affiliate campaigns denied by Google for trademark infringement.
One manufacturer (boot maker) spanked me by email for using their brand name in my PPC ads.
I have pasted the language from the decision. It appears to have been bid upon.
“Both parties agree that from March 26th to November 6 2006 Defendants (Disability Group) used Plaintiff’s (Binder & Binder) trademark in an advertising campaign through Google AdWords. …In order to have their ads appear on the search results page, Google advertisers select and bid on AdWords (purchased keywords) so that their ad might be displayed on the search results. Defendants used “Binder and Binder” as AdWords linked to their websites.”
The key element of the test is whether this use “is likely to cause confusion, or to cause a mistake, or to deceive.” The court did not provide much analysis of this element of the test, but seemed to suggest that the lack of sophistication of the consumer was relevant, at least for the length of time it takes to click on a sponsored link.